Budget Affects Capital Again

Last week Cable & Wireless announced that their business had been badly affected as a result of the Budget and the Liberal-Tory Cuts, particularly in relation to the cancelling of IT contracts. Its shares fell 17% in one day on the news. Today, the BBC is reporting that Connaught, is reporting further bad news.

I blogged a while ago, about the fact that its shares had fallen after the Budget, because it had announced that the Government plans on Social Housing and Housing Benefit would hit its business as a social housing provider. Back then its shares fell by 30% on two separate days. Now it has announced even more bad news, saying it will need additional funding. Its shares fell another 70% today. Its shares are now down 90%.

Every developed Capitalist economy has a State that occupies between 40-50% of economic activity, even the home of the free market - the US. That is no coincidence. Monopoly Capitalism needs a large State for a number of reasons, most significantly it acts as a means of automatic stabilisation for Capital. These examples are just an example of that. Cut back on State spending, and one of the first casualties are all those private firms that have lucrative contracts supplying it with goods and services. That is one reason why under current conditions, drastic cuts in the State are not in the interests of Capital.

However, as a recent post by Phil over at AVPS points out, actual policy formation by Governments is a far more complicated matter than just Government Parties meeting the needs of the ruling class. Generally speaking, the ruling class exercises its power and influence through its State. Governments operate under a different dynamic. In order to get elected they have to address themselves to their core vote, and increasingly to the "middle ground". The political ground on which they stand in order to win that vote is not at all co-terminous with the interests of Capital.

The State can and will act to represent the interests of Capital, by frustrating those elements of Government policy - whether a Tory Government or a left labour Government - if they seriously undermine the interests of Capital. But, the degree to which they are prepared to do that depends upon how seriously the interests of Capital are damaged. For example, the State will only rise in open revolt if the interests of Capital are threatened to the degree where its continued dominance is called into question. But, there are plenty of ways in which the damage by Government's to the interests of Capital can be undermined without such an open confrontation. Obfuscation, embarrassing Ministers with leaks, or "mistakes", and so on. Having said that, the Tories could still do damage with their illiterate economics.